The world’s 11th largest economy, South Korea is forecast to grow 3.3% this year, according to the country’s Finance Ministry. The economy is expected to grow 4.3% in 2013. The domestic market, which the World Economic Forum defines as GDP plus the value of imports, is currently ranked 12th in size among 142 countries, while the international market, defined as the value of exports, is ranked fifth. The World Economic Forum estimated that company spending on R&D in Korea was the 11th highest among 142 countries in 2012. According to a government report, R&D spending comprised 3.7% of GDP in 2011. Korea’s industrial strength is not new, but recent increases in government and private investments in R&D, especially in the pharmaceutical, semiconductor and renewable energy sectors, make it a particularly attractive market for analytical instrument and lab product companies.

Thermo Fisher Scientific is one instrument company with an established presence in Korea. “One of our premier brands, Fisher Scientific, has had a presence in Korea for more than 15 years,” said Syed Jafry, Thermo senior vice president and president, Asia Pacific and Emerging Markets. This April, Thermo opened a 1,800-sq.-ft. demonstration lab and training center in Seoul (see IBO 6/15/12).

The company’s largest end-markets in Korea are academia and government, as well as industrial and applied. Thermo also serves the health care market, including diagnostics and point-of-care applications at hospitals and labs, as well as basic research for treatments and public-health collaborations among universities, and government and other agencies. “The Korean government’s investment and emphasis on preventative care offers solid opportunities in our health care business, especially given our specialty diagnostics and allergy-testing capabilities,” said Mr. Jafry.

Thermo hopes to benefit from Korea’s growing economy. Mr. Jafry noted that Korea offers substantial opportunity to expand company sales. “South Korea now represents 7% of our business in emerging markets,” he explained. “Korea has a mature economy, but one in which we have identified significant growth potential, alongside markets including Brazil, Russia, India and continued growth in China,” he said. “The government, as well as public and private companies, has made a significant investment in the life sciences, and we expect to contribute to this growth.” In particular, he noted investments in pharmaceuticals and biotech, specifically biosimilars and bioprocessing.

Recent increases in Korean R&D spending have been led by new government spending plans. The 577 Initiative called for basic research to comprise 35% of total research by this year. It was part of the Science and Technology Basic Plan, a 2008 plan to improve the efficiency of R&D funding, which provides an overall strategy to prioritize science and technology.

According to Invest Korea, the government will spend about KRW 16 trillion ($14.2 billion = KRW 1129.1 = $1) on R&D this year, a 7.6% increase. Primarily responsible for making and implementing government science and technology policies is the Ministry of Education, Science and Technology (MEST). MEST is also responsible for the Basic Plan, which for 2011–2015 focuses on collaborations among ministries and companies, as opposed to the previous five-year plan, which focused on universities. Last year, the government established the National Science and Technology Commission (NSTC) to streamline R&D funding. The NSTC oversaw 70% of Korea’s 2011 R&D budget.

A Batelle and R&D Magazine report released in December 2011 projected that combined R&D funding by the Korean government and private sector would reach KRW 63.0 trillion ($56.4 billion) in 2012, a 7.0% increase over 2011 levels, which is ahead of the expected global average increase of 5.2%. A NSTC survey released this month estimated that 2011 R&D spending by Korea’s 32,673 government and private institutions was KRW 50.0 trillion won ($44.6 billion), a 13.8% increase. The survey found that the number of Korea’s R&D employees increased 8.5% in 2011 to 375,176, of which 77% were solely focused on R&D. According to the OECD, Korea’s gross expenditure on R&D increased 9.3% annually in real dollars from 2001 to 2010.

In 2011, according to the NSTC survey, the private sector was responsible for 73% of total R&D, the government and public sector accounted for 26% and foreign investment was less than 1%. R&D spending by private sources grew 9.5% annually in real dollars from 2001 to 2010, according to the OECD. According to the Korea Industrial Technology Association, private sector R&D spending will increase 8.4% this year to exceed KRW 41.1 trillion ($36.7 billion) for the first time. Spending by large conglomerates is expected to rise 8.9% to KRW 31.8 trillion ($28.5 billion), and spending by medium and small companies should increase 6.6% to KRW 9.3 trillion ($8.3 billion). The number of corporate R&D facilities increased 5.8% to 23,059 in 2011.

The semiconductor industry is also helping boost R&D spending in Korea. In fact, Korea and Taiwan are the only countries where the semiconductor equipment market is projected to grow this year, as the global semiconductor equipment market is expected to decrease by 2.6%, according to Semiconductor Equipment and Materials International. The country’s semiconductor equipment market, valued at KRW 9.7 trillion ($8.7 billion) in 2011, is slated to grow 32.6% this year. There are 370 companies in the Korean semiconductor market, according to a 2010 Invest Korea report. IC Insights estimated that Korea accounted for 7% of global semiconductor R&D spending in 2011.

Bruker is a company that has taken advantage of the growth of Korea’s semiconductor market, as well as other markets. Bruker began selling its instruments in Korea 40 years ago. Today, all of the company’s business operations are located at a center near Seoul. “We have a long tradition in trade with Korea, first as a distributor for many years and since 2004 with a newly established Korean entity,” explained Clive Seymour, vice president of Bruker Daltonics for Asia Pacific. He told IBO that Bruker’s most prevalent technology in Korea is low- to high-field NMR, followed by GC and GC/MS for food safety and environmental markets. Growth in the semiconductor market is also boosting sales of ICP-MS.

Mr. Seymour noted that life science demand in Korea is predominantly from the academic and government sectors. “In recent years, there has been an evident push to bring expertise from academia into the industrial sphere,” he explained. “This is evidenced by the linkage of the biosimilars industry with leading academic institutions, [which have] biopharmaceutical and glycoprotein expertise.”

The pharmaceutical industry is also among the industries helping drive R&D growth in Korea. The Korean pharmaceutical market was estimated at KRW 1.8 trillion ($1.6 billion) in 2011 and is projected to grow 8% in 2012, according to Pharmaceutical Market Europe. Multinationals accounted for 40% of the market. Korea has about 300 drug manufacturers. In September 2011, the Korean government announced plans for KRW 1 trillion ($890 million) in spending by 2020, including KRW 530 billion ($471.9 million) in government funds, on the Development of Global Blockbuster program to help local companies develop new pharmaceuticals. A survey of 100 biotech firms conducted earlier this year by MEST and the Korea Biotechnology Industry Organization indicated that biotech R&D spending was on the rise. In 2011, these companies spent KRW 643.7 billion ($576.6 million) on R&D, an increase of 12.6%. Spending on biosimilars and medical equipment R&D also has increased substantially, soaring 26.5% in 2011.

Competing with foreign companies like Bruker and Thermo is SCINCO, a domestic manufacturer of UV-Vis spectrometers, spectrophotometers and thermal analyzers, whose primary end-markets are academic, national and private research labs. The company, established in 1990, sells its own instruments as well as serving as a distributor for companies such as Thermo and Distek. Remaining competitive in Korea’s instrument market is not easy, said SCINCO Sales Manager Jin H. Joo, who described the competition as severe. But, as he told IBO, such competition is beneficial to customers, who can select instruments from the company of their choice based on criteria such as price and performance. “However, we are now successful by investing in applying advanced technologies to our instruments and creating good customer relationships based on the best support,” he said. “We can take action on the customer’s request, while the customer has to wait some time for a foreign company.” Mr. Joo stated that the global recession has affected the Korean economy but told IBO that he believes the semiconductor, life science and bioscience sectors are growing the fastest for instrument companies.

Instrument companies are also benefiting from Korea’s recent initiatives to support renewable energy. As part of 2008’s Framework Act on Low Carbon, Green Growth, in 2010, the Ministry of Knowledge Economy predicted that private spending on green technology by 30 major firms would reach KRW 22.4 trillion ($20.0 billion) for the 2011–2013 period, which would be an increase of 48.3% over the 2008–2010 period. Also as part of the Framework, the National Green Technology R&D Plan projects green technology R&D spending to reach KRW 3 trillion ($2.7 billion) this year, which would be a 9.5% increase. As part of the R&D Plan, this year, 82% of the budget for green technology R&D is expected to go to 27 core green technologies. As part of the Framework, the government is investing 2% of Korea’s GDP annually, or KRW 107 trillion ($95.6 billion) in 2009’s Five-Year Plan for Green Growth. The Plan aims to improve the share of green technology R&D in Korea from 16% in 2009 to 20% of all government R&D in 2013.

 Bar Graph: 2009–2011 Korean R&D Spending (Billions)

 2009      32.81

 2010      37.93

 2011      44.60